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Reserve Bank of Australia

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Reserve Bank of Australia in Martin Pl., Sydney

The Reserve Bank of Australia came in to being on the 14th January 1960 to operate as Australia's central bank and banknote issuing authority. The bank is the banker to the Federal government and some of the Australian states. It is headed by the Governor of the Reserve Bank, who as of 2004 is Ian Macfarlane.

Contents

History

The predecessor to the Reserve Bank, the Commonwealth Bank of Australia, was established in 1911. It was initially just a commercial and savings bank. The Department of Treasury issued notes until 1924, when this responsibility was transfered to the Commonwealth Bank.

The Commonwealth Bank gradually gained more central banking activities until 1945, when new laws formalised its central banking powers. In 1960 the central banking functions of the Commonwealth Bank were transfered to the new Reserve Bank of Australia.

The 1980s saw the abolition of Exchange Control as a result of the float of the Australian Dollar and the creation of a banking supervision function for the Reserve Bank. This banking supervision function was then transfered to the newly created Australian Prudential Regulation Authority in 1998.

Roles and responsibilities

The bank is administered under the Reserve Bank Act 1959, passed by the Australian Federal Parliament. Section 10(2) of this act sets out the bank's primary responsibilities:

"It is the duty of the Reserve Bank Board, within the limits of its powers, to ensure that the monetary and banking policy of the Bank is directed to the greatest advantage of the people of Australia and that the powers of the Bank ... are exercised in such a manner as, in the opinion of the Reserve Bank Board, will best contribute to:

(a) the stability of the currency of Australia
(b) the maintenance of full employment in Australia; and
(c) the economic prosperity and welfare of the people of Australia."

In practice the Reserve Bank concentrates on the first objective, that is to control inflation through monetary policy. (See also open market operation.) The current objective is to maintain the annual inflation at between "2-3 per cent, on average, over the cycle". This target was first set in 1993 by the then Reserve Bank Governor Bernie Fraser and was then formalised in 1996 by the Treasurer Peter Costello and incoming Reserve Bank Governor Ian Mcfarlane.

Before 1961, the functions of the Reserve Bank were performed by the Note Issuing Branch of the Commonwealth Bank. The Commonwealth Bank continued to exist as a government operated retail and commercial bank (until it was privatised in the early 1990s), whilst the Reserve Bank offers no such services.

Board of directors

The Reserve Bank's board of directors consists of the Governor of the Reserve Bank, Deputy Governor of the Reserve Bank and Secretary to the Treasury aswell as 6 external members appointed by the Treasurer. Excluding changes in the number of directors, the structure of the board of directors has remained unchanged since 1951.

The current members of the board of directors are:

Governors

Governor of the Reserve Bank of Australia Term as Governor
Ian Macfarlane September 1996 present
Bernie Fraser September 1989 September 1996
RA Johnston August 1982 July 1989
HM Knight July 1975 August 1982
JG Phillips July 1968 July 1975
Herbert "Nugget" Coombs January 1960 July 1968
Governor of the Commonwealth Bank of Australia Term as Governor
Herbert "Nugget" Coombs January 1949 January 1960
HT Armitage July 1941 December 1948
H Sheehan February 1938 March 1941
EC Riddle October 1926 February 1938
J Kell October 1924 October 1926
DSK Miller June 1912 June 1923

See also

External links

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